Tuesday 12 June 2012 13.33 EDT
First published on Tuesday 12 June 2012 13.33 EDT

A security firm accused of exploiting unpaid workers to steward the jubilee is being investigated by the government watchdog the Security Industry Authority after allegations surrounding the firm's actions were passed on by the home secretary.

The SIA confirmed that it was investigating Close Protection UK (CPUK) after a letter written by the former deputy prime minster Lord Prescott, which complained about the company's treatment of its 80 unpaid workers and apprentices, was handed over by Theresa May.

The SIA added that it investigated all alleged breaches of its code of conduct for companies who are given Approved Contractor Scheme (ACS) accreditation.

Two jobseekers told the Guardian that they had been told to sleep under the bridge, had to change in public, worked in the pouring rain with only cellophane ponchos for protection and were then asked to sleep in a swampy campsite.

CPUK has also won a contract believed to be worth £850,000 to serve Olympic venues with fire marshals during the Games.

In a statement, the SIA said, "All allegations concerning non-conformance with ACS requirements are investigated," adding that they did not comment on individual cases "unless they result in action".

Prospects, the company responsible for getting the jobseekers used by CPUK back into full-time work, also started a full internal investigation this week and is due to interview all those involved about their working conditions.

Prince said the company was inspected by the SIA last Thursday and that a report had been sent to Locog – the organising committee for the Olympics. She said that the matter had already been "concluded to everyone's satisfaction".

Prescott said:

"I had argued that the recent revelations in the newspapers seemed to prove that CPUK were in breach of 2.3.1(f) of the SIA Approved Contractor Status terms and conditions of approval, which states a contractor can have approved status removed if it is 'found no longer to meet the fit and proper person criteria applied by the SIA'.

"I now await an urgent response from my letter to Locog requesting an investigation into how CPUK was appointed to a reported £850,000 fire marshaling contract for the Olympic venues and the company's competencies to deliver it.

"I believe the safety of spectators, staff and competitors is of the utmost importance and we need to be assured that CPUK can deliver this."